Budget must give tax relief in household medical costs: Insurance industry

'Biggest health care burden is not hospitalisation but diagnostics and medicines,' they say

Budget 2026–27 should give tax relief on medical costs and post-retirement income, insurance industry executives said, noting that the two issues are of importance to Indians.

 

Health insurance

 

“India’s biggest health care burden is not hospitalisation but OPD, diagnostics and medicines. They make up nearly 60 per cent of household medical spending,” said Anand Bansal, product head, health and life insurance, at Square Insurance, a brokerage. Such expenses receive no direct tax relief.

 

A family earning more than Rs 12 lakh and spending around Rs 45,000 annually on OPD care could save Rs 6,000 to Rs 9,000 in tax if the Budget introduces a separate Rs 25,000–Rs 30,000 deduction for OPD and preventive care. “For senior citizens with recurring expenses, this directly improves monthly cash flow,” said Bansal.

 

Amit Chhabra, chief business officer of general insurance at insurance platform Policybazaar, said increasing tax rebate limits under Section 80D would further ease costs. A family paying Rs 50,000 as health insurance premium in the 30 per cent tax slab saves Rs 7,500 due to the Rs 25,000 cap. “If the limit is raised to Rs 50,000, annual tax savings double to Rs 15,000,” he said. For senior citizens, higher limits could push savings up to Rs 30,000 a year.

 

Medical inflation of 11.5 per cent-14 per cent is eroding household finances, said Srikanth Kandikonda, chief financial officer of ManipalCigna Health Insurance. Increasing public health spending and incentives for preventive care, including tax benefits beyond existing Section 80D limits, could reduce hospitalisations and long-term treatment costs.

 

 

Life insurance and annuities

 

“Today, annuity income is fully taxable, making retirees tax-inefficient despite disciplined savings,” said Bansal. A retiree earning Rs 70,000 annually from annuity pays about Rs 14,000 in tax in the 20 per cent slab, leaving Rs 56,000 in their hands. “With tax parity, net income could rise to Rs 65,000-Rs 70,000,” he said.

 

Tarun Chugh, managing director and chief executive officer of Bajaj Life Insurance, said aligning annuity taxation with other long-term savings instruments will allow individuals to choose products based on suitability rather than tax differences, strengthening retirement security and financial inclusion.

 

General insurance

 

Affordability remains a barrier to wider adoption of general insurance. “For a Rs 1,200 policy, stamp duty and servicing costs can add 10–12 per cent,” said Bansal, suggesting exemptions for sub-Rs 2,000 policies to attract first-time and rural buyers.

 

Rimjhim Talukdar, assistant vice-president at Anand Rathi Insurance Brokers, said targeted tax credits for upgrading inadequate covers, standardised plain-vanilla products, and GST removal on retail general insurance could widen the risk pool without pushing up premiums. She also pointed to preventive healthcare and telematics-driven motor insurance as ways to improve loss ratios over time.

 

Chhabra said removing GST on hospital room rents beyond the Rs 5,000-per-day threshold will ease patients’ costs. Naveen Chandra Jha, managing director and chief executive officer of SBI General Insurance, added that incentives for micro-insurance, digital infrastructure, and climate-risk covers could deepen penetration while improving claims governance.

 

 

Vaibhav Kathju, founder and chief executive officer of Inka Insurance, said higher tax incentives for term and health insurance, along with dedicated tax sections for pure protection products, could encourage early adoption and reduce underinsurance. Together, insurers argue that targeted Budget 2026 reforms could make insurance more affordable, relevant, and effective for Indian households.